Tesco PLC (LON:TSCO) has a fan in the City that thinks shares in the retailer have a further 30% to grow.
The stock advanced 3% in early afternoon trade after HBSC moved to ‘buy’ from ‘hold’ with a target price of 260p.
It now thinks the supermarket chain, which last month was embroiled in its ‘Marmitegate’ tussle with supplier Unilever, is more than equipped to deal with the threat posed by a revitalised Asda.
“When we downgraded Tesco to hold we were clear this was due to a concern that Asda might undertake a major price repositioning,” said analyst David McCarthy.
“We were also clear that we saw Tesco as the long-term winner and we stand by our previous analysis on its significant underlying economic advantages.
“We still expect Asda to get more aggressive on price (what else can it do?) but the pace of the Tesco recovery is increasing, meaning it is better able to cope with whatever Asda does.”
His comments come ahead of a capital markets day for analysts and investors on Wednesday.
The shares, up 36% in the last year, added a further 6.05p to settle at 204.5p.
Of the 16 analysts logged as following Tesco by the Broker Forecasts site only five are in the HSBC camp as ‘buyers’, six are ‘neutral’, with the remainder in the ‘sell’ camp.
The consensus price target, meanwhile, has alert only 3p in the past six months as it has been edged down to 182p a share.